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Trump Threatens German Carmakers With 35 Percent U.S. Import Tariff

U.S
President-elect Donald Trump warned German car companies he would
impose a border tax of 35 percent on vehicles imported to the U.S.
market, a plan that drew sharp rebukes from Berlin and hit the
automakers' shares.

Donald Trump has threatened BMW with a border tax on cars built at its new Mexico plant.

In
an interview with German newspaper Bild, published on Monday, Trump
criticized German carmakers such as BMW <BMWG.DE>, Daimler
<DAIGn.DE> and Volkswagen <VOWG_p.DE> for failing to produce
more cars on U.S. soil.

"If
you want to build cars in the world, then I wish you all the best. You
can build cars for the United States, but for every car that comes to
the USA, you will pay 35 percent tax," Trump said in remarks translated
into German.

"I
would tell BMW that if you are building a factory in Mexico and plan to
sell cars to the USA, without a 35 percent tax, then you can forget
that," Trump said.

At 1155 GMT (6:55 a.m. ET), BMW shares were down 2.2 percent, while Volkswagen's (VW) and Daimler's were both down 2 percent.

Under
pressure to deliver on campaign promises to revive U.S. industrial
jobs, Trump has turned his fire on carmakers that use low-cost Mexican
plants to serve the U.S. market. He has also warned Japan's Toyota
<7203.T> it could be subject to a "big border tax" if it builds
its Corolla cars for the U.S. market at a planned factory in Mexico.

All
three German carmakers have invested heavily in Mexico, but also
pointed out on Monday that they manufacturer in the United States as
well.

BMW
executive Peter Schwarzenbauer told reporters the company was sticking
to plans to invest around $1 billion in a new plant in Mexico, which is
due to go into production in 2019 and create at least 1,500 jobs.

SERIOUS WARNING

"The
president's powers are considerable. He can legally impose tariffs of
up to 15 percent for 150 days. Trump is not constrained by Congress,"
said Simon Evenett, professor of international trade at Switzerland's
University of St Gallen.

"Even
if foreign companies object and seek to challenge the legality of
tariffs, it will take at least 18 months to get decided. Corporate
strategies will be disrupted by then."

While
investing in Mexico, German carmakers have quadrupled light vehicle
production in the United States over the past seven years to 850,000
units, more than half of which are exported from there, Germany's VDA
automotive industry association said.

"In
the long term, the United States would be shooting itself in the foot
by imposing tariffs or other trade barriers," VDA President Matthias
Wissmann said in a statement.

German
carmakers employ about 33,000 workers in the United States and German
automotive suppliers about 77,000 more, the VDA said.

Speaking
in tabloid newspaper Bild, German Economy Minister Sigmar Gabriel said
that rather than trying to penalise German carmakers, the United States
should instead respond by building better and more desirable cars.

Norbert
Roettgen, head of Germany's foreign affairs committee, said Berlin
needed to take Trump's comments seriously. "He seems to be absolutely
focused on short-term job interests and security interests ... not that
he is looking for free trade so much, but more for protection," he told
Reuters.

MEXICAN PLANS

Daimler's
Mercedes-Benz and BMW already have sizeable factories in the United
States where they build higher-margin sports utility vehicles (SUVs) for
export to Asia and Europe.

Around
65 percent of BMW's production from its factory in Spartanburg, South
Carolina is exported overseas. BMW builds the X3, X4, X5 and X6 models
in the United States.

"It
is surprising that Trump singles out the carmaker that exports more
vehicles from the United States than any other manufacturer," Evercore
ISI analysts said.

A
BMW spokeswoman said the planned plant in the central Mexican city of
San Luis Potosi would build the BMW 3 Series from 2019, with the output
intended for the world market. The plant would be an addition to
existing 3 Series production facilities in Germany and China.

In
June last year, BMW broke ground on the plant, pledging to invest $2.2
billion in Mexico by 2019 for annual production of 150,000 cars.

Daimler
has said it plans to begin assembling Mercedes-Benz vehicles in 2018
from a $1 billion facility shared with Renault-Nissan <RENA.PA>
<7201.T> in Aguascalientes in Mexico. A spokesman for Daimler
declined to comment on Trump's remarks.

Last
year, VW's Audi division inaugurated a $1.3 billion production facility
with 150,000 vehicle production capacity near Puebla, Mexico. Audi said
it would build electric and petrol Q5 SUVs in Mexico.

Audi
declined to comment on Monday. VW also declined to comment on Trump's
remarks but noted it was investing another $900 million in its U.S.
plant in Chattanooga, Tennessee.

Trump
called Germany a great car producer, saying Mercedes-Benz cars were a
frequent sight in New York, but claimed there was not enough
reciprocity. Germans were not buying Chevrolets at the same rate, he
said, calling the business relationship an unfair one-way street.

Chevrolet
sales have fallen sharply in Europe since parent company General Motors
<GM.N> in 2013 said it would drop the Chevrolet brand in Europe
by the end of 2015. Since then, GM has focused instead on promoting its
Opel and Vauxhall marques.

Trump Threatens German Carmakers With 35 Percent U.S. Import Tariff
Reviewed by newsrepublique media
on
January 16, 2017
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